What is probate? And should you avoid it?

What is probate? And should you avoid it?

February 20, 2013 - by

Many potential clients want desperately to avoid probate when their loved ones have passed.  Probate isn’t for everyone, but it also gets a bad rap sometimes, both by attorneys and clients alike.  Many have likely heard a second-hand story about probates gone wild, where assets were hung up unceremoniously by the court.  That can happen, but those types of cases are rare, and there are usually very good reasons for a long drawn out probate (such as title issues or creditors’ claims).  Let’s pull back the curtain a little and see what this misunderstood process really is before we decide whether to evade it.

In the simplest of terms, probate is just a court-supervised process for settling the estate of the deceased.  Probate in Oregon is nothing inherently painful to go through, though it is public and will tie up assets for a short while.  It’s very mechanical and methodical in ferreting out liabilities, figuring out who should receive the decedent’s assets, and actually making the transfers to heirs, devisees, and creditors.  A typical probate (as opposed to one of those atypical never-ending probates we’ve all heard tales of) lasts somewhere between six months and a year.

And there are some things that probate is very good at:

  1. Clearing Title.  Generally speaking, probate is a good idea when you want to perfect a chain of title, particularly in real estate because title companies like clear title.
  2. Resolving Disputes Between Heirs.  Non-probate solutions only work well when heirs can come to an agreement.  When there are disagreements, probate is a means of resolving them with finality.
  3. Settling Creditors’ Claims.  Probate assets transferred to heirs or devisees outside of probate can still be reached by creditors with claims against the decedent.  Probate resolves creditors claims and insures that assets transferred are free of claims by the decedent’s creditors.
  4. Apportioning Taxes.  Taxes are due if taxes are due, including the decedent’s income tax returns and death tax returns, and payment of any amount assessed.  This is true whether probate is initiated or not.  Through the probate process, we can identify who should be liable for those taxes.
  5. Valuing Assets.  The more expensive the assets, the more useful probate becomes.  This is partly because more valuable assets (like real estate) warrant care and attention to ensure proper chain of title.  Also, one of our tools to avoid a full probate proceeding is the small estate affidavit, which only applies when the total estate value is below $275,000 and real estate values are less than $200,000.

All of the above represent circumstances where probate might be a good idea.  Depending on how assets are titled, probate may simply be a necessity.  For smaller estates, probate may not be necessary.  And with some advance planning, it’s very easy to avoid probate if that is your goal.  And that will be the topic of tomorrow’s post.


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